The Hindu Business Line : Bank dividend

A Finance Ministry spokesman is reported to have indicated that the Government has advised public sector banks to maximise dividend payout to help bridge the fiscal deficit. In the same breath he also said that the decision of individual banks will be the prerogative of their boards. To bring pressure on banks in the matter of dividends is not desirable for several reasons. In the first place, it militates against the spirit of liberalisation and letting the banks manage their affairs without government interference. Secondly, though banks have done well in taking steps to deal with the problem of non-performing assets, the magnitude of the underlying numbers is still too large to be complacent about. Thirdly, the size of fiscal deficit is such that the payout of a few hundred crores of rupees over what banks will declare as dividend will not make much difference. It would be like feeding peanuts to an elephant.

A. Seshan

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